If you have decided co-op or condo living is for you, New York City, with its plethora, is an excellent choice. However, it would help if you found out how much you will enjoy living in a particular building. Co-op boards are notoriously strict, but condo associations also have their own house rules. Before submitting an offer, it is critical to ask building management the questions we highlight below.
It is important to investigate the neighborhood; however, you should not overlook investigating the building since you want to enjoy living there and yield a profit when you sell, particularly given the city’s high prices. Whether you are working alone or with an exclusive buyer’s agent, to help you, we compiled a comprehensive list of questions to ask building management through the listing agent.
Is the building’s balance sheet strong?Is the building’s balance sheet strong?
You should ask the management company to send you the latest financial statements. Your broker and lawyer should check these, too. While you are perusing the financials, the right follow-up questions for the management company is their view on the balance sheet’s strength and whether they believe in holding a reserve. If so, how much do they typically keep in the “rainy day fund”? If it is a small amount, you can expect to pay special assessments when the building needs a major repair.
What is the plan for assessments?What is the plan for assessments?
Rather than keep a reserve fund, some boards charge assessments when there are significant repairs or planned upgrades. They typically spread the payments over time. You need to know if you will inherit or any ongoing assessments or any planned assessments since this affects your monthly fee.
What are the building’s improvements?What are the building’s improvements?
You need to know which improvements the management company oversaw. You should also ask when the work was completed since you could face a significant assessment down the road if the updates and repairs have not recently been completed. Large ticket items are particularly relevant to ask about, including the elevator and roof.
What is the percentage of owners versus renters?What is the percentage of owners versus renters?
Generally applicable to potential condo owners since these are easier to rent. A substantial amount of investor-owned apartments rented out is a potential red flag. Investors typically sell before individuals during market corrections. If sold at a discount, this could pressure future prices since the building’s comps will be affected.
Owners also have a different economic incentive than renters. Therefore, you want to live in a building that has a large portion of unit owners.
How many units are in the building?How many units are in the building?
There is no right or wrong answer to this question since it frequently comes down to personal taste. A smaller number of units typically means more privacy. While there is a potential higher cost, should the board impose assessments, there is also less competition when you are ready to sell your unit, and many buyers are attracted to smaller, boutique-style buildings.
There is a scarcity value attached to it since the city is full of skyscrapers, and if it is a desirable building, there a higher chance it will outperform a larger one, using history as a guide. If you are an investor that plans on renting out your unit, there is also less competition, and the unit mix is critical.
What do the maintenance or common charges cover?What do the maintenance or common charges cover?
This question may seem unnecessary, but co-op and condo boards use these monthly fees for many items. Standard monthly common charges are typically for shared services and amenities. These include management fees and the building’s operating expenses. Sometimes, it contains utilities and items such as decorations for the common areas, a storage room, and a gym.
A co-op’s maintenance fees also cover real estate taxes, insurance, and the building’s mortgage payments. Asking what is included in your monthly cost helps you make an apples-to-apples comparison between various buildings’ charges. It also prevents misunderstandings once you move in.
What rate has maintenance/common charges increased?What rate has maintenance/common charges increased?
Although you can afford the monthly payments maintenance or common charges now, you need to factor in how quickly these have increased. Ask for the figures over the last few years since it will give you a complete picture. If there were any large jumps, you should ask why that is the case.
How restrictive is the board?How restrictive is the board?
Some boards, particularly in a co-op, have stringent rules. House rules govern the residents’ normal behavior. Since you are going to live there, you need to know if you can live within them.
Is subletting allowed?Is subletting allowed?
This is more applicable to co-ops. Many do not allow subletting, so if you were planning to earn extra income this way, you need to choose a condo building or a cooperative with liberal house rules. However, other boards allow subletting, but with restrictions. If this is the case, ask how long the term you can lease your apartment. Also, ask and if the board charges fees for the right to rent or sublet.
Have unit buyers had problems obtaining financing?Have unit buyers had problems obtaining financing?
When you are applying for a mortgage, not only do you have to qualify, but the lender also does due diligence on the building. In essence, you and the building need the bank’s approval. Learning whether people have had more trouble obtaining a mortgage when purchasing a unit than under normal circumstances can tell you a lot about the building. Lenders are hesitant to extend the financing for various reasons, which could make you think twice about purchasing since they know quite a bit about the building and its history.
For instance, if there is a lawsuit pending against the building, lenders are extremely reluctant to extend you a mortgage unless you are willing to pay a significant amount of cash. A sponsor owning more than 50% can also cause problems.
Does the building have an ongoing litigation matter?Does the building have an ongoing litigation matter?
As mentioned previously, if a building is in a lawsuit, it is challenging for you to obtain financing. If the building is suing the developer, securing mortgage financing is challenging but still possible, depending on the litigation details. Under these circumstances, you should protect yourself with a mortgage contingency.
Additionally, the answer may also help you understand the board’s quality. For instance, if shareholders or condo owners are in litigation with the building, you can delve deeper into the issues to see if you want to live there. Perhaps contractors are suing the board for non-payment, which could hint at stinginess, greed, or financial trouble.
What is the elevator situation?What is the elevator situation?
You should find out if the building’s elevators are sufficient to support the number of residents. Not only should there be enough, but these should also run efficiently. After all, no one wants to wait a long time to get home or go out. You also do not want your guests, particularly the elderly or ill, to have a long delay.
How is the building heated and cooled?How is the building heated and cooled?
You are trying to find out the building’s system. If there are central HVAC units, this could be more expensive, and you are reliant on the board to switch over from one to the other. The management company can tell you when this typically occurs. Natural gas is generally cheaper than oil, with the latter’s prices generally more volatile.
How do the amenities work?How do the amenities work?
Some buildings include many profits, such as a gym and a room you can use for parties. Others charge extra for these items. Depending on your usage, you may prefer one over the other.
Is there a weight restriction on pets?Is there a weight restriction on pets?
While this is a less obvious question for most people, it is an essential question for you to ask before submitting an offer. It is not unheard of for boards to only allow small pets in the building. If you have a large pet, such as a dog, or plan on getting one, you do not want to even progress to the point where you submit a bid.
How do I get deliveries?How do I get deliveries?
It sounds minor, but some buildings only allow drop-offs in the lobby, while others permit the delivery personnel to come to your apartment. You may like the convenience of delivering to your residence. If you are tired, you may not feel like going downstairs to pick up your pizza. This is weighed against the building’s security needs. This also there is less wear on tear on the common areas, such as the carpet.